Wright medical lowers ’09 guidance despite ’08 profit.

But their decision to lower the company’s 2009 guidance despite a profitable fourth quarter and an “outstanding” 2008 is indicative of the business community’s waning confidence in a timely economic recovery.

In early December, the company predicted its revenue target for 2009 to fall between $510 million and $520 million. The estimate represented an annual growth rate of 10 percent to 12 percent on an as-reported basis, and 13 percent to 15 percent on a constant currency basis. At that time, Wright executives forecast the company’s full-year earnings per share to be within 96 cents and $1.02.

But by the time Wright released its fourth-quarter and full-year earnings report 72 days later (Feb. 19), executives decided to cut the company’s 2009 guidance by 2 percent. Full-year sales are now expected to fall between $500 million and $510 million, with an annual as-reported growth rate ranging from 7.5 percent to 10 percent. The constant currency growth rate is now down as well, falling between 11 percent and 13 percent, and full-year earnings per share have dropped to a range of 85 cents to 92 cents.

Wright executives had simple explanations for adjusting their 2009 forecast from December: They wanted the company’s guidance to be more in line with industry expectations for procedural demand, and they wanted to more accurately reflect the costs associated with Wright’s global compliance initiatives.

“Our December guidance call provided an outlook for the year that incorporated a measure of cautiousness given the global economic outlook and the challenges it could present for the orthopedic sector,” noted John K. Bakewell, Wright’s executive vice president and chief financial officer. “At that time that caution related primarily to the outlook for our international stock and distributor markets, specifically, related to the impact [of] bank credit availability. … Since that time we’ve gotten more visibility into the 2009 outlook for that area of our business, and it appears that our level of cautiousness was indeed warranted.”

By the time their rivals released fourth-quarter results and offered their own outlooks for 2009, Wright executives didn’t need much convincing to lower the company’s guidance. “Although we haven’t yet seen any meaningful slowdown in our direct markets that one would ascribe to general economic conditions, based on our competitors results and outlooks, it is clear that there was a slowdown in market growth rates in Q4 and that the general outlook for the industry is for slowing growth in 2009,” Bakewell said.

Wright’s fourth-quarter and year-end results, however, show no signs of slowing growth. Quarterly sales jumped 16 percent to $120.1 million, and gross profit rose 18 percent to $85 million. The Arlington, Tenn.-based firm experienced double-digit growth in both domestic and international sales, with domestic sales increasing 18.8 percent to $74.8 million, and overseas sales climbing 12.7 percent to $45.2 million.

Despite a bigger loss—$2.7 million, or 7 cents per share compared with a profit of $1.4 million, or 4 cents per share in the comparable quarter of 2007—Wright’s fourth-quarter results were above analysts’ average estimates.

Sales also rose in each of the company’s product lines during the fourth quarter, ended Dec. 31, with hip and extremity products sustaining the strongest growth. Hip product sales totaled $41.9 million, a 22 percent increase over the $34.3 million Wright reported during the fourth quarter of 2007. Likewise, extremity product sales skyrocketed 31 percent, reaching $24.8 million.

Full-year extremity product sales soared even further, reaching $88.8 million, a 42.7 percent increase compared with the $62.3 million in sales Wright reported in 2007. Hip product sales for 2008 rose 19.8 percent to $160.7 million, while knee product sales increased 17.2 percent to $119.8 million. Total sales for 2008 swelled to $465.5 million, a 20 percent jump compared with 2007 and profit climbed 19.8 percent to $331.1 million.

Full-year Sales Rise at Zimmer Despite Q4 Drop

In a recent conference call with analysts, Zimmer Holdings Inc. President and CEO David Dvorak used the word “challenging” to describe 2008 and its impact on his firm.

The same word could have been used to describe the company’s fourth-quarter results. Earnings fell 37 percent, and net sales dropped 4 percent, as declining sales, mounting legal claims and lingering costs associated with the September purchase of Abbott Spine impacted Zimmer’s bottom line.

“Although we are not satisfied with our 2008 financial performance relative to the market opportunities, we have made good progress in addressing the issues that negatively impacted our results,” Dvorak told analysts during the conference call. “In the fourth quarter, we continued to ramp up our surgeon training and education programs, further advanced activities on the product development front and resolved a large number of our outstanding payments to consulting healthcare professionals and institutions. We are excited about the prospects for re-establishing positive momentum in our overall business, with the goal of restoring revenue growth as 2009 progresses.”

That’s a tall order, considering Zimmer’s fourth-quarter net earnings slid to $167.5 million from $263.8 million in the fourth quarter of 2007. Diluted earnings per share were 75 cents for the quarter, down 33 percent compared with $1.12 in 2007.

Zimmer posted net sales of $1.03 billion for the fourth quarter, ended Dec. 31, down 4 percent from $1.07 billion reported in the same period of 2007. Hip sales dipped 3 percent in the quarter, while worldwide reconstructive sales decreased 1.4 percent in constant currency. Knee sales experienced a negligible growth of 0.8 percent, hindered by slower sales across all geographic segments and lower pricing on a worldwide basis. Knee pricing was down 1.5 percentage points in the quarter, and executives attributed the drop to lower reimbursement prices now in effect in Australia and Japan.

Other factors that contributed to the poor showing in the final months of 2008 were an increase in claims associated with Zimmer’s Durom Acetabular Component, a device used in hip implants in the United States. The Warsaw, Ind.-based company voluntarily suspended the distribution of the component in July after a group of surgeons reported problems with the device loosening and requiring surgical revision. Zimmer allotted $69 million in the fourth quarter to cover claims associated with the component.

Despite its substantial fourth-quarter loss though, Zimmer posted full-year earnings of $848.6 million, a 10 percent increase compared with the $773.2 million it reported in 2007.

Net sales for the year were $4.1 billion, a 6 percent increase compared with its 2007 sales. Dvorak said it was the first time in company history that sales topped $4 billion.

ConMedCorp. Reports Dismal Sales in Q4

It was bound to happen. The financial crisis that has shaken both investors and consumers and has ravaged global economies is beginning to penetrate the medical device market.

ConMedCorp. fell victim to the flat-lining economy late last year. Its fourth quarter sales shrank 5.4 percent, going from $189.6 million in the final quarter of 2007 to $179.2 million in the last three months of 2008. The company’s GAAP (generally accepted accounting principles) diluted earnings per share fell 5 cents, or 12.1 percent, to 36 cents. Non-GAAP diluted earnings per share plummeted even more, going from 44 cents in the fourth quarter of 2007 to 34 cents in the final quarter of 2008, a decrease of 22.7 percent.

ConMed’s gross profit and net income fell in the fourth quarter as well. Its gross profit dropped 6.9 percent, going from $95.6 million in 2007 to $89 million in the fourth quarter of 2008, ended Dec. 31.

The company’s net income declined to $10.57 million, a 10.6 percent decrease compared with the $11.8 million ConMed reported in 2007.